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All About Inventory and Logistics - Amazon Seller Tips with Chelsea Cohen - Part 1
January 10, 2022
All About Inventory and Logistics - Amazon Seller Tips with Chelsea Cohen - Part 1
Things we discussed in this session:

A. Part 1

B. Part 2

Things we mention in this session of Seller Round Table:

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Transcription in this episode:
[00:00:01] spk_0: Welcome to the seller roundtable e commerce coaching and business strategies with [00:00:06] spk_1: and er not and amy Wiis [00:00:08] spk_0: hey what's up everybody this is Andy are not with amy Louise and this is seller now round table number, wow, round table number 125. We have Chelsea a cohen here today. Chelsea Oh thank you so much for being with [00:00:25] spk_1: us. Yes, thanks for having me. [00:00:27] spk_0: Usually I can nail that but today it's marbles in the mouth [00:00:31] spk_1: day, No problem. Facebook was down yesterday so you have [00:00:36] spk_0: the withdrawal? No, I was hoping like I posted when it came back up, I was hoping it would just never come back. I think our society and world would be better off honestly at this point, but it came [00:00:46] spk_1: back [00:00:47] spk_0: unfortunately. So here we [00:00:49] spk_1: are a love hate thing because I totally, we advertise on it and I was like, it really got you to start thinking about how many people you are not connected to unless you're connected through facebook instagram or WhatsApp. Right? Yeah, first I'm like Lincoln I need to like bulk up my linkedin because that's the only safeguard against losing all your context. [00:01:13] spk_0: Yeah Lincoln works with like I've been doing since you know, facebook banned me for like the third time a couple of years ago I've been doing a lot of Lincoln stuff. So yeah, I have a giant amazon seller group there. I have a ton of connections there and some of the best leads for my software business for clients, things like that have all come from linkedin so especially if you're in the, you know, B two B space, you can't really beat linkedin. Um also I just feel like the conversations there, you know, it's like, even though I'm guilty of it as well, like I just get tired of seeing all the politics and all the Bs that comes along with facebook. So um yeah, so I I really enjoy Lincoln and I agree. I think it's a good lesson in terms of owning the audience, right? We talk about that a lot. I think that's a stark reminder of how if you don't own your audience that you know, if facebook decides, they don't like you all of a sudden they can just shut you off. So kind of scary. But enough about that Chelsea to tell us about you kind of your journey up to this point, you know, if you want to go back to where you were born, where you raise school, kind of, anything like that, we'd love to get to know you better. [00:02:17] spk_1: Sure. It's funny because I always start with my amazon selling story. Um but I'll probably, I'll probably start with one of the more interesting stories that actually happened when I was eight. My mom told me this happened. Um and it sounds like me, I don't have kids yet. We are going to, we are planning on having kids in the next year or so, but when I was eight years old, I was talking to my mom and she was telling me something, you know, well when you have kids you know and I'm like what? She was like well when you have kids and she was telling me something, I was like I'm not going to have kids, she's like really why not? Like who will take care of them, I'm going to be working. So that was like from the beginning like since I was eight years old, I knew that I wanted to to work and to do things and like she had her own business, she she had a daycare and then it she started homeschooling myself and my brother and then that turned into a school and uh my dad had his own business for a while and so it was always you know entrepreneurial, I was always seeing that people were building businesses and so you know that was kind of the start of things, I've done a bunch of random things but they've all been either My own business, trying to do my own business or making money to pay off the debt from my business so that I could go back to creating my own business. So that's kind of how I started with Amazon was in 2014 after one of these stents is working at an accounting firm um in finance, so that's kind of the start, [00:03:52] spk_0: oh so so that was the start and then so you you discovered amazon and like was it uh was it like you got an amazon and you were just killing it. Was there like a steep learning curve and kind of, what was that journey like? [00:04:07] spk_1: Yeah, I mean 2014, it was definitely a lot easier if you did something different than you could do well. So I signed up for a course that a lot of people took back then called the amazing selling machine. And I actually, we had missed the cut off because they do these, you know, twice a year, you know, promotions, we missed the cut off and we actually, we tried to do so well, we'll just find another course and we started to do are a um and that went horribly. We had, you know, they had some app and it was scanned wrong. So so Ari my husband was buying things and bring them back and I'm like, these are not profitable and it was just, I was like, this can't be what they're all doing. I had a friend making 60,000 a month who has done this other person, like they can't be going to big lots and buying, you know, random products and this can't be how you make $60,000 a month. So I ended up um someone wanted to refund their course and they ended up selling it to me. So I paid some random person, $3000 for this course. I'd never seen a promotion about the course at all? And it wasn't until I actually got access to the course that I was pitched on private label and I was like, this is brilliant and I got so excited. And so from the point we started the course to the point we sold our first product from china. It actually was only seven weeks. So that was like how uh ambitious I was because I thought we were behind everybody. Uh, and then we started selling the first product sold fantastically and we uh launched our second product after that in about eight months into the business. We were able to put our jobs, [00:05:51] spk_0: love it. I love it. So um, on that same note, kind of what was, you know, what was the biggest struggle in terms of, you know, getting into the business like, you know, some people, no matter what their background, right? Like for me I was kind of like a tech guy. I had a background in like my aviation and all that kind of stuff, but like, and I was an entrepreneur almost my whole life, but I didn't really know about like systems, processes, kind of some of the things that when you own your own business, especially one like an amazon business where there's so many moving parts and things that you need to know things you need to do, you know, uh customer service that needs to be replied to at a certain point kind of what, you know, what were your weaknesses, once you started going into the business and how did you improve on those? [00:06:35] spk_1: Yeah so I think delegation has always been my my week weakest point um you know feeling like oh well I can just do it myself and you know I'll get it done faster if I do it myself. But it's like yeah maybe that one time you get it done faster but when you compound all the times you do it yourself you're actually wasting a lot of time. So that's always been kind of a hang up of mine. And so I'm constantly working on improving systems and then also just being able to kind of let go and let somebody screw something up. [00:07:08] spk_0: Yeah I love that. All right so let's get into the meat potatoes, why you're here the ninja skills that you bring to the table, our inventory management um you know kind of helping people navigate that as it's getting worse by the year with amazon, you know either having inventory limits, um you know losing stuff. I I just heard from somebody, I think it was our last guests who said that they like amazon lost their their entire L. T. L. Shipment for like two months. You know there's all these struggles when it comes to inventory on amazon. I remember when I first started like I didn't even really grasp the concept of FDA or even how that worked. So kind of how did you get into inventory and you know, kind of how, howard do you navigate it effectively? [00:07:54] spk_1: Yeah. So I originally, it was to solve my own problems, you know, um I had the experience of having our entire christmas shipment lost until after christmas lost, I'll say lost because it's not really lost, its don't, it's sitting in a parking lot somewhere and it's not being unloaded and we'll get into more about that and how to prevent that from happening. But that was why I got into inventory management. The margins on my business were, you know, were shrinking and there were certain things that I couldn't control amazon fees, you know, people coming in dropping their prices, black cat tactics from competitors, all those things I couldn't really control. But what I could control was the lost revenue or the lost profit from either overstocking or stalking out. And so I really figured out that I had to get a handle on how can I make sure that my inventory arrives on time, How can I make sure that my orders are correct and I'm not ordering way too much and taking out a loan, paying interest on that loan and then paying all those storage fees after the product doesn't sell like you think it's going to sell. And so that was In 2018 when I started putting together a really detailed spreadsheet and found that it takes a heck of a long time, definitely. Yeah, I think that just inventory management in general is something that all of us struggle with because if we don't manage your inventory, you ran out of stock or you lose money and there's so much in there and it's like we're always trying to figure it out, right? We're always trying to create a new spreadsheet. I know yesterday I was you know, talking with my husband about our business processes and I'm like okay, how many new spreadsheets have we created in the last, you know six months in people don't tend to keep them up either because you always need a new metric, right? Like okay, well no I want to look at it from this side of things and it's not easy and there is no perfect solution, right? You mentioned people with so stop that you're constantly making improvements to your tools and you know it there's no perfect solution but it's an important solutions so I can definitely identify with that. So what do you think in terms of struggles that amazon sellers face with inventory management? What are those major struggles that you hear from people? What are they dealing with when it comes to inventory management? Yeah, it's interesting because you know it has evolved a bit when we first started um there is something that we that we recognized was happening with sellers because the first year and a half of so stock, I personally on board and every single person who came into the software. So I talked with hundreds of sellers and that was one of the ways and has been one of the ways that we get a lot of our insights into where we need to head, what we need to do, you know, features and things like that. But one of the common things, there are two common things that that sellers just generally weren't doing one was they were not planning with a buffer stock in mind. They didn't have any safety net, they just, you know, they they didn't have that as part of their system. Um so they were running out of stock or they had the air freight things and those were big problems first of all and so in onboarding people they would be shocked at their first order. But it's like, yeah, you need to, you need to create that first order is always going to be larger to get yourself caught up to implementing a buffer stock. So finding the ability to do that whether you know, it's adjusting your cash flow, your terms, your payment terms, whatever it is, finding a way to hold additional inventory just in case that was kind of the first side of things. And the second thing that we noticed people were not doing was planning their marketing against their inventory. So that was a big Problem. Even eight figure sellers that we talked about Would stop themselves out because on a whim they wanted, you know it's mother's day, we should do a mother's day campaign, let's do a 20% off coupon, push it to our list and sell a ton of this product for mother's day. And father's day is the next month coming coming up. You know father's day they're stalking out and the cost involved and not just stalking out and then having to airfreight and having to re rank your product but 20% off that you basically gave your product away when you could have spelled it full price and state and stop. You know if you're paying an agency that's a cost too. So all of these costs kind of start adding up and so that was something that we started really pushing as a concept of inventory minded marketing, you know, making sure that your marketing is in sync with your inventory. Got it. So the first thing that you mentioned was having a buffer stock so making sure you have enough stock to have a buffer in between orders. And then the second thing was planning your marketing around your inventory so that you're not just again causing yourself to stuck out and really be stressed out at the same time. Something that you taught me that I didn't know, I know it's impossible to teach me things that I don't know. But anyway. No but something you taught me that I didn't know about restock limits which is what all of us are dealing with, whether you're an eight figure cellar or a five figure seller, you are dealing with restock limits and something that you taught me was that stock outs and how much my inventory stays in stock has to do with my restocked limits. If I'm out of stock, I don't actually can't send more inasmuch in as I could before. And so that was an even bigger reason to stay in stock. And it made all the sense to me once you showed me how restock limits are calculated. So speaking of that, how do you recommend sellers deal with restock limits or look at restock limits? Yeah, so it's important to understand what, you know, what contributes to restock limits. Um what is amazon using to predict that and we know, you know, there's certain things that amazon has inside of that algorithm that we can't know and then we also know that no matter what amazon's normal, you know, formula for calculating restock limits is every now and then they can put full, you know the lever and say guess what all of you guys were lowering risk documents because we don't have, you know, things are going chaotic and crazy in the warehouse, they're going to pull a lever. Um that's something that we have learned in the past the hard way. So it gives you a very unsettling feeling about your inventory and about your business, but in terms of restock limits. Um the metric that is most important is sell through and sell through is made up Of two different things. The way the amazon looks itself through is a look at your 90 day sales. And then they also look at the average inventory that you are holding within um that period of time. So it's your utilization. Right? What are you holding at F. B. A. And then also what are you selling? And so uh that makes up yourself through. We see in the I. P. I. Limit one of the metrics when we're looking at R. I. P. A. Score is sell through. And so that if you if you know that it's 90 days uh of sales. You know that if you increase your 90 day sales, your total sales you're going to increase your self through. Which should help to increase your restock limits. But if you also lower your um utilization right? Moving excess inventory that that has an effect on cell through as well. Right? So those are two things to not to over Overstock inventory that's not actually moving through the system. Um And so sell through is the number one metric, if you have you know looking at all of the metrics restock limits I. P. I. All of that it all comes back to sell through. And that's what amazon really cares about. Got it. So if we can master ourselves through then we can master are re supplements. Um And as far as those, those units that are not moving, I'm guessing you're going to recommend that we maybe pull some of that stuck out and manage it through a third party logistics provider. But the tough thing is right now it's really hard for people to find Reliable 3rd Party logistics provider. So do you have any advice for how people can pull out their stock or not from that stock in that isn't moving as much and how can they find a reliable three pl uh yeah, so not all three pls actually do outside fulfillment. So you're looking for, when you're looking for ways to fulfill that inventory outside of amazon, you're looking for someone who is a fulfillment center and someone that you can actually trust will be solely focused on fulfillment or we'll have a separate dedicated team for fulfillment because one of the things that we've seen happen last year is there were companies that decided, okay, we're going to do fulfillment, but we're also gonna do replenishment, which means sending boxes, sending your pallets of inventory into amazon. And when these companies, when they went into fourth quarter, they were not plant, they had not planned well enough to actually fulfill both sides. And so the replenishment orders tended to just sit there while all of the fulfillment orders took place. So you need to make sure that if you're the company that you're working with does both that they'll be able to handle both sides of your business first of all and second of all um that they're actually they're actually recommended by someone that you trust because there's a lot of these companies that are popping up, we have a list that we that we give to people of basically community source or community vetted uh contacts for that particular service. Got it. Cool. So I know you have a ton of really great resources on the so stock website about all of that, so that's a great place for people to visit. Um Now in terms of reordering from suppliers, so you mentioned that people need to have a buffer stock, what do you recommend for? How often people should order? How should they manage their orders from suppliers as far as how much they should order at once. And then how should they get themselves on a schedule in order to have that buffer stock? Yeah. So so yeah, the first thing would be to figure out what your buffer stock needs to be. Um and a good rule of thumb for Amazon it gets difficult depending on what your restock limits are, but a good rule of thumb is to keep it at at least 30 days worth of inventory. Some people are going up to 45 days if they can afford it just because of how long it's been taking uh to check things in and and we are switched, we switched to something called an as needed Uh or a min max restocking. So instead of you know a lot of the time people like to go okay I only want to send inventory in every month or I only want to send it in every two months. That that has been shortening and shortening but you have to be more flexible because of how tight some of these restock limits are. We do what we have settings called min max restocking where we say you know if we want inventory to be sent in when it gets to this you know this low amount, we want to stock it up to this high amount and kind of have a minimum and a maximum um That helps us to instead of like a schedule, a transfer schedule in days, it's a transfer schedule based on uh the inventory, the minimum and the maximum inventory settings if that makes sense. Got it. Yes that does make sense. And then um one more question about just staying in stock, How do you recommend that sellers stay in stock? Yeah so staying in stock has a lot to do with logistics and I think that um it's becoming more and more clearer how much you really need to understand logistics and how you need to plan for any scenario. So having a plan B. And having a plan C. Is extremely important for staying in stock. The Andy gave an example I think of someone who their shipment got lost for two months. So that would not have, that would be a problem, it always be a problem, but it wouldn't be as much of a problem if you had backup solutions, for example, sending all of your inventory in L. T. L. Um I call it uh you know, putting all your eggs in one basket or letting someone have all your stuff right? You never want to let someone have all your stuff if amazon has all your stuff and it's on one trailer and they decided to park that trailer and not unload it for two months and tell you it's lost, then that's going to destroy your business, right? The repercussions of your restock limits crashing after that and trying to work your way back up into a range where you can consistently have inventory be fulfilled by amazon becomes very difficult. So holding something back so that you can send it small parcel delivery if needed. Uh is important, it is expensive but it's not necessarily more expensive than stalking out. So send most of your stuff, you know LT L. And have some reserved to send small parts of delivery if you need it. Same thing with putting everything on a boat, but most stuff on a boat and then have inventory sitting at your suppliers warehouse to airfreight over if needed. So those are some of the main um logistics. Uh it's kind of tweaks that you need to make that and having an outside fulfillment center if needed as well, awesome. So the other thing as far as sending in new stock. So if I've got some stock in a three pl or my own warehouse and I've got you know some in stock in amazon. How often should I be sending in new stock to amazon? Um I mean it depends on what your restock limits are but you'll want to have a sell through rate that probably is between uh in amazon inside amazon two and three. So um amazon looks at 90 days. So three would be that your monthly you're turning over your inventory monthly. Right? Um So you want to make sure that you can turn over your inventory monthly or say every two months. That would be the frequency. Uh It depends on you know it depends on the product, how you know how much inventory you send in of course but that would be that would be a good target. [00:23:39] spk_0: Thanks for tuning in to part one of this episode, join us every Tuesday at one PM pacific standard time for live Q. And A. And bonus content after the recording at cellar round table dot com, sponsored by the ultimate software tool for amazon sales and growth seller. S. C. O. Dot com. [00:23:55] spk_1: And amazing at home [00:23:57] spk_0: dot com